IRS Loses Bid for Power Over Tax Preparers Pending Appeal

The U.S. Internal Revenue Service lost a bid to delay a court ruling blocking its regulation of as many as 700,000 tax preparers while an appeal of the decision is pending.

U.S. District Judge James Boasberg, while upholding his order barring enforcement of the program’s licensing requirements, modified it to say the IRS isn’t blocked from testing preparers on a voluntary basis or keeping continuing education centers open while the agency tries to overturn his ruling at the appeals court in Washington.

“But no tax-return preparer may be required to pay testing or continuing-education fees or to complete any testing or continuing education unless and until this injunction is stayed or vacated by the Court of Appeals,” Boasberg said in an opinion today in Washington.

Boasberg’s ruling “is a victory for tax preparers. They will be able to continue preparing tax returns this season without having to get permission from the IRS,” said Dan Alban, an attorney with the Institute for Justice, a self-described libertarian public interest law firm in Arlington, Virginia, representing three tax preparers who filed the suit.

Dean Patterson, a spokesman for the IRS, didn’t immediately respond to an e-mail requesting comment.

IRS Appeal

The IRS previously said it would appeal even if Boasberg didn’t lift his injunction.

Boasberg invalidated the preparer oversight program on Jan. 18, ruling that the IRS overstepped its authority by relying on an 1884 law that allows it to regulate people presenting cases before the Treasury Department.

The program required preparers to register with the federal government, pass a competency test and meet continuing-education requirements. A 15-hour continuing-education regime began in 2012 and the testing was set to go into effect this year.

The registration component of the program remains in effect, according to Boasberg’s order today.

Public Accountants

The rules were designed to impose standards on return preparers who aren’t certified public accountants, attorneys or enrolled agents already licensed to practice before the IRS.

They affect independent tax preparers as well as those who work for large companies like H&R Block Inc.

The IRS asked Boasberg to lift the injunction for the duration of an appeal to prevent the waste of more than $50 million spent so far to operate the program and limit exposure to lawsuits and demands for refunds of user fees.

The injunction was modified “to make it clear that its requirements are less burdensome than the IRS claims,” Boasberg wrote.

The case is Loving v. Internal Revenue Service, 12-cv-00385, U.S. District Court, District of Columbia (Washington).

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